European debt deal

[The Progressive]

I'm in favor of competing currencies.

When inflation occurs it means that the value of money has declined. As a result you're investments will decline, and you will be forced to cut on spending ( the purchasing power of the money has declined).

1) I don't think you mean euro and dollar and yen or won ............. I think you mean it like a bartering system, right? Gold v. Cows/Chickens/Polar bears v. Corn v. Paper money? I could see how that would work out wonderfully, lol.

2) Low to moderate inflation is preferrable to deflation. Quickly, name any period in history where deflation has led to economic prosperity?

[Shryke]

Competing Currencies, holy shit! :lol:

Inflation encourages spending instead of saving. Low level inflation is good, sometimes even moderate inflation is good, deflation is horrific. Did you miss Milton Friedman or something?

[The Iceman of the North]

What does 'competing currencies' mean? Having more than one legal tender within a jurisdiction?

[Shryke]

Anyway, back to the Euro and how fucked it is.

Pretty fucked right now: http://graphics8.nytimes.com/images/2011/11/15/opinion/111511krugman2/111511krugman2-blog480.jpg

That's panic starting up in France.

This is a good collection of stuff too:

So Munchau says that the Germans believe that the installation of Mario Monti will solve everything. The president of the Bundesbank has ruled out any lender of last resort actions by the ECB. And Gavyn Davies does the math on Italian stabilization; it’s not pretty unless rates come way down, and restoring cost-competitiveness looks impossible without a higher inflation target for the eurozone

http://krugman.blogs.nytimes.com/2011/11/13/the-correct-pronunciation-of-ec-is-eek/

This also has a pretty good essay on what happens if the Euro falls:

http://krugman.blogs.nytimes.com/2011/11/16/decline-and-fall/

And again:

If the ECB writes the check, the economic and market outcomes are vastly different than if they do not. Your personal outlook as an investor, business person or worker will change dramatically for decades to come based upon this one policy choice and how well-prepared for it you are.

[Shryke]

What does 'competing currencies' mean? Having more than one legal tender within a jurisdiction?

Only way I've ever heard it used.

[The Iceman of the North]

Only way I've ever heard it used.

Sounds like a perfect receipe for economic stagnation to me.

[paddington]

post ~285

Good article thanks for the link Shryke.

It's hard to respond, it's a very disturbing picture he paints.

[Shryke]

Good article thanks for the link Shryke.

It's hard to respond, it's a very disturbing picture he paints.

Yeah. 6 months ago, I'd have thought you were crazy for thinking the euro was gonna collapse. 3 years ago, I would have said you were a conspiracy theory spouting lunatic.

Today? Today I think it's almost a certainty unless the ECB completely changes course.

[SpicyTurkey]

1) I don't think you mean euro and dollar and yen or won ............. I think you mean it like a bartering system, right? Gold v. Cows/Chickens/Polar bears v. Corn v. Paper money? I could see how that would work out wonderfully, lol.

The Idea behind competing currencies is that no one is forced to accept any one currency. Individuals could contract a payment be made in a currency of their choice (Gold, Chickens, Cows, Corn, Paper money ext.). If either party did not pay according to the contract, then they get sued accordingly.

2) Low to moderate inflation is preferrable to deflation. Quickly, name any period in history where deflation has led to economic prosperity?

Anything beyond market demand is hurtful.

[The Iceman of the North]

The Idea behind competing currencies is that no one is forced to accept any one currency. Individuals could contract a payment be made in a currency of their choice (Gold, Chickens, Cows, Corn, Paper money ext.). If either party did not pay according to the contract, then they get sued accordingly.

Yeah, this sounds like a good receipt to achieve the same level of economic growth as England experienced in the 12th and 13th Centuries.

[Dinsdale!]

I'm in favor of competing currencies.

Are you a BitCoin enthusiast then?

Are you also in favor of multiple legal tender. The mechanism by which the dollar is kept in value is that the government accepts dollars and dollars only to pay taxes, and will not take kindly to you attempting to pay them with chickens.

Using a commodity as a currency is problematic, because if the commodity starts to increase in value, people horde it and than there is not enough currency around, which causes economic troubles for purely mechanical reasons.*

*(Do you know how annoying it is to travel in countries in which there is a hording and shortfall of small denominations, such that every single person demands exact change?)

[SpicyTurkey]

Yeah, this sounds like a good receipt to achieve the same level of economic growth as England experienced in the 12th and 13th Centuries.

What does that have to do with competing currencies?

[Dinsdale!]

The Idea behind competing currencies is that no one is forced to accept any one currency. .

No one is forced to accept any one currency now. Shops commonly refuse large denominations. A dollar bill being "Legal Tender for all Debts Public and Private" refers only to payments to the government and payments to your bank.

[SpicyTurkey]

Are you also in favor of multiple legal tender. The mechanism by which the dollar is kept in value is that the government accepts dollars and dollars only to pay taxes, and will not take kindly to you attempting to pay them with chickens.

Using a commodity as a currency is problematic, because if the commodity starts to increase in value, people horde it and than there is not enough currency around, which causes economic troubles for purely mechanical reasons.*

*(Do you know how annoying it is to travel in countries in which there is a hording and shortfall of small denominations, such that every single person demands exact change?)

I don't think you understand. Competing currencies does not limit you to only a commodity based currency. That's a complete bastardization of it's true meaning. The basis (again) is that you are not limited to only one currency. I can still used paper money, but that does not mean that I am only limited to it. The government would be able to offer its currecy in the midst of other alternatives.

[Former Lord of Winterfell]

Yeah, this sounds like a good receipt to achieve the same level of economic growth as England experienced in the 12th and 13th Centuries.

How so? It doesn't mean you don't have an "official" currency at all. It just means you can enter into a contract with someone to agree to some other form of payment, but both parties have to agree. The vast majority of transactions likely would still be in currency because of the considerations inherent in your point.

Heck, you can essentially do that now if you so choose through clever drafting. You set payment based on the cost of a particular commodity at a given time. "I'm going to sell you 12 goats, and you have to pay me an amount equal to the market price of 50 chickens." You could do that today.

[The Iceman of the North]

How so? It doesn't mean you don't have an "official" currency at all. It just means you can enter into a contract with someone to agree to some other form of payment, but both parties have to agree. The vast majority of transactions likely would still be in currency because of the considerations inherent in your point.

Heck, you can essentially do that now if you so choose through clever drafting. You set payment based on the cost of a particular commodity at a given time. "I'm going to sell you 12 goats, and you have to pay me an amount equal to the market price of 50 chickens." You could do that today.

Yes, you could do that. But try operating a shop where you only accept goats or chicken as payment.

[Lummel]

How so? It doesn't mean you don't have an "official" currency at all. It just means you can enter into a contract with someone to agree to some other form of payment, but both parties have to agree. The vast majority of transactions likely would still be in currency because of the considerations inherent in your point.

Heck, you can essentially do that now if you so choose through clever drafting. You set payment based on the cost of a particular commodity at a given time. "I'm going to sell you 12 goats, and you have to pay me an amount equal to the market price of 50 chickens." You could do that today.

Exactly you can do it today - I'm at a loss as to the supposed significance of the idea, the reason we don't have a mass of competing currencies and commodities is because it would be a pain in the posterior not because it is forbidden.

We can form a contract of employment in which I pay you in swiss Francs, there are shops in central London which will accept payment in Euros and possibly even in USD.

[Dinsdale!]

I don't think you understand. Competing currencies does not limit you to only a commodity based currency. That's a complete bastardization of it's true meaning. The basis (again) is that you are not limited to only one currency. I can still used paper money, but that does not mean that I am only limited to it. The government would be able to offer its currecy in the midst of other alternatives.

Oh, I'm just very skeptical of any completely un-backed or un-regulated currency. And like I said, you are literally, as in this very moment, not limited by law to payment for most services via greenback. To me there are two key questions:

1. Would you end the USD as sole legal tender for all debts public and private?*

2. What currencies are you proposing?**

* That is could the government still force payment to itself or bank debts in the currency of choice? I'm trying to elucidate what exactly your total economic system is.

** Because like Lummel you, right now, other than payments to Banks and Governments, do live in a competing currency world. It's just that there aren't any such currencies that people use on a regular basis. Which makes sense to me, as multiple currencies is a major pain in the ass.

[The Marquis de Leech]

One must be careful of the context when one refers to "Intrinsic value". The worth of an object (like you said) is subjective. If there is no demand for it, then it has no value. When contrasting fiat to gold, one can say that gold in comparison has intrinsic value. In that context it means that, stripped of its use as money, paper fiat money would have almost no subjective value, not even close to the number printed on it. Gold on the other hand has subjective value even if it is not legal money.

Potatoes have intrinsic value: you can eat them. Gold is generally useless for anything other than looking pretty and the occasional bit of dentistry.

Orchestrated deflation

No-one sets out to achieve deflation. It only happens when countries fail to prevent it.

is certainty bad, and I would like you to understand that inflation is an excess of the supply of money over the demand for money,

Inflation is simply a general rise in prices. There are multiple causes of it.

and in both cases (unwarranted deflation and inflation) are more likely to occur with the help of government (because of the lack of competition). As a result of governments (and central banking) we experience a huge spike in inflation and deflation regardless of demand.

Can we have some factual data to back this up?

Not if they are adjusted. The main reason for adjusting the debt is for the same reason. That it unless a central bank prints the money, and pays off its debt right away before the money is trickled down. If they do go that road, then the poor and the middle class will suffer significantly.

What are you talking about? Taking US government bonds, you have the option of either buying the inflation adjusted version, or the (normal) non-inflation adjusted version. The rates of return on the inflation adjusted version are currently negative: which is tantamount to you lending me $100 and me paying back $95 in a year's time.

[The Marquis de Leech]

Did you miss Milton Friedman or something?

If only Chile had...